hen you first open your new site, hits will be slow incoming (unless you are an expert at generating them). And saleswill be correspondingly scarce. Even so, you need to be checkingyour stats and sales with care. The number that matters most toyou is ...

The Value Of A Hit

By this, I mean, what is a hit worth to you? (By hit, I mean one unique visitor or user session.) Compute this number by dividing total sales amounts (gross profits) by the number of hits. That is, find the total earned for say a month. Thisincludes your part of sales of products produced by others,commissions on sales, and so forth. Your stats will provide the number of unique hits.

For example, if you have a gross of $200 for the month, and1000 hits, the value of a hit is 200/1000. Which is 0.20 or 20cents. If gross was only $50, then this number is only 0.05 or 5 cents.

Moving Averages

With a mature site routinely generating hits, this number isnot likely to vary markedly from month to month. Even so, a goodplan is to include in your results a 3 (or 4) month movingaverage. For example, given Jan: $0.30, Feb: $0.20, and Mar:$0.10, add these three numbers and divide by 3. (30 + 20 + 10)/3= 60/3 = 20.

The reason this helps is that looking only at the monthlydata, the above looks like an ugly downtrend. The 3 monthaverage eases that downer feeling. Equally important, it helpsyou keep from getting too excited about an apparent up trend.

Suppose the value for April jumps to $0.40. For the newaverage, January is excluded; you look at only the last threemonths. This gives (20 + 10 + 40)/3 = 70/3 = 23.33 which isroughly 23 cents. In considering 23 cents as opposed to 40 centsfor the month, there is a more reserved view of the sudden jump.

I chose numbers here to make things easier to follow. Actualresults for your site will look quite different. And since thecomputations, while simple, can be tedious and prone to error,most who take this sort of thing seriously use a spread sheetprogram, such as Excel.

Why These Numbers Matter

The value of a hit is fundamental to what you can afford topay for advertising. And you'd like to stay a bit under thisfigure. If the ad produces only this value per hit, the campaignwas a fizzle, for no profit was made. (The exception would bethe value of new customers as subscribers to your newsletter,those who return to purchase other products, and so forth.)

There's a lot of trial and error in testing ads, but the insand outs of it are off topic here. For our purpose, suppose youhave a well tested ad that can be expected to generate 25 hits in1000 impressions. If the value of a hit to you is 50 cents, thenyou can expect a gross of 25 x $0.50 or $12.50.

What this means is you can afford to pay up to $12.50 CPM(Cost per 1000 impressions) provided hits add to your subscriberlist or returns for other products. If you expect only a onetime sale, you probably will not want to pay more than $6.25 CPM,so that half of revenue is immediate profit.

With an established site, even given troublesome variationsmonth to month, it is a fairly straightforward matter to decidewhat you can afford to pay for advertising. Things aredifferent, though, for ...

New Or Small Sites

Initially you just don't have enough hits or sales to producenumbers that make any sense at all. There is likely to be largevariations each month. Even so, it's best to begin this kind oftracking even when only getting started.

Probably the best approach is to forget about a 3 or 4 monthmoving average, and generate an average this month for allearlier months. Whatever your results, you can not afford toadvertise until you have a tested ad and feel confident from thevalue of a hit the ad will produce profits. For a new site,unless you already know the advertising game, this may meanwaiting a year or more before even giving advertising a try.

Getting Started With Advertising

Most find advertising in ezines to be the most effectiveapproach on the Web. The trick is to find ezines directed atyour target. Then test your response to an ad in the leastexpensive way. Given a poor or inadequate response, try anotherezine. But given a good response, go for it. In theory,advertising that works can bring unlimited profits.

Ezine advertizing costs are often stated with a single price. To make your numbers work, convert this price to CPM. This alsomakes it easier to compare costs from ezine to ezine. Forexample, if the circulation of an ezine is 4000 and the cost ofthe ad is $20, you are paying $5 CPM.

Other Paths

I've haven't heard any recent reports of good success withbanner advertising using the CPM model. Some are reportingsuccess with the pay-per-click model, which means you pay onlyfor clickthroughs to your site. This is essentially the samemodel used with the pay-per-click search engines such as the oneat GoTo.Com. There are no tough decisions here. If the value ofa hit to you is greater than what you must pay for a click toyour site, go for it. If it's not, ignore these avenues until it is.

With an established site, several search engines, such asGoogle, offer some interesting possibilities I have not tested. Pricy, though, for new or small sites.

Directories

To submit a listing to Yahoo requires payment of $199. Regardless of the value of a hit to you, submit as soon as yoursite is sufficiently polished. Consider it a one timeadvertising cost, and don't look back. Yahoo may deliver as much as a third of search engine related traffic.

LookSmart is not such a sure thing. Also $199, they'reasking too much, in my opinion. But I still recommend paying thefee. Again, it's a one time cost. Over time, a listing will payfor itself, and may ultimately do so many times over.

SNAP is another matter. They also ask for $199 for a listingin their "Top Sites" directory. I don't think it's worth it. And I have not heard others recommend it. But it is an option. Submit for free to their "Live Directory," then walk away.

DMOZ is a must. Submitting a listing is free. And if youfind a second category into which your site fits well, a secondsubmission about a month later works well.

So When Should An Advertising Campaign Be Launched?

As soon as the value of a hit and a tested ad will produceprofits. Until this point is reached, advertising is a waste of money.

For a new or sluggish site, the way to go is to keep workingat boosting your CR (Conversion Ratio). That is, continuouslyexamine all elements in all paths leading to sales, in search ofimprovements that bring a higher CR. By increasing your CR, youincrease the value of a hit. Ignore all thoughts of advertisinguntil your CR is sufficient to produce a hit value high enough to cover the costs of placing ads.